CBN Governor, Mallam Sanusi Lamido Sanusi
By Onwuka Nzeshi and Ndubuisi Francis
The Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, Wednesday faulted the proposal by the House of Representatives to raise the crude oil benchmark in the 2013-2015 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper.
This is just as the executive arm of government is considering a new date for the presentation of the 2013 Appropriation Bill by President Goodluck Jonathan to the National Assembly.
The House of Representatives had turned down the proposed October 4 date last week on the grounds that it needed more time to consider and pass the MTEF.
Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said that a new date was being considered for the presentation of the Appropriation Bill but did not give details.
In the MTEF presented to the National Assembly by the president, the Federal Government had proposed to retain the 2012 benchmark of $75 per barrel in the 2013 budget.
But the Joint Committee of the House on Finance and Legislative Budget and Research as well as Aids and Loans on Tuesday recommended an upward review by $7 to the oil benchmark.
The joint committee’s proposal was hinged on the fact that increasing the benchmark would attract more revenue to the federation and assist government in reducing its deficit and borrowing.
Sanusi, who appeared before the joint committee Wednesday on the MTEF, described the position of the lawmakers as erroneous.
He argued that raising the oil benchmark does not in any way translate to more revenue for the government because benchmarks are mere projections that could either be realised or not depending on the volatility of the price of oil.
He further explained that Nigeria's current benchmark of $75 per barrel was one of the highest among member states of the Organisation of Petroleum Exporting Countries (OPEC).
According to him, a number of oil-producing countries like Venezuela have a benchmark as low as $30 as a way of ensuring that they do not fall victim of over ambitious projections that may turn out to be unrealistic.
“The benchmark does not necessarily give you more revenue. You can increase it to $100 if you like, but does that bring money?
“What is important is to increase crude oil production and sales. The $75 is even on the high side relative to other countries,” Sanusi said.
He observed that Nigeria has always been concerned about oil benchmarks during every budget year because of over-dependence on the oil sector for revenue and the fact that the economy as a whole is highly dependent on importation.
Sanusi urged the committee to place less emphasis on oil benchmarks and concentrate on how to assist government to plug the leakages in the revenue chain.
“You are talking about oil price and production benchmarks, how do we even know the figures are correct? Does NNPC have a metering system? How do they know how much we produce?
"What access does the Minister of Finance have to validate the figures emanating from the primary source of revenue?
“Until we have metering system, we cannot be too sure about these figures. But we have NEITTI and we need to strengthen it because all these arguments on benchmarks will disappear if we know exactly how much we earn and we are sure that all revenues will go into government's pockets,” he said.
Sanusi said that the solution to budget deficits was not the benchmark but diversification of the economy to enhance the development of the non-oil sector.
He said a major leak in government revenue could be traced to pipeline vandalism and crude oil theft in the Niger Delta region.
The Federal Government, he said, could overcome this challenge by tightening security around its network of oil pipelines in the Niger Delta.
He, however, drew a nexus between the insecurity in the country and the state of the economy. According to him, the crisis that has hit Kaduna and Jos in recent years has its origins in the collapse of the textile firms and the closure of the mines that used to provide thousands of jobs for the inhabitants of these two cities.
On the complaint of lopsidedness of the budget in favour of recurrent spending, Sanusi explained that 80 per cent of the recurrent budget goes to salaries and wages of government personnel.
The only way out, he said, was for government to shed weight through retrenchment, an action, he added, might not be politically expedient.